Did You Collect the Needed W-9s?

Article Highlights:

• The IRS Form W-9 is used to obtain independent contractors’ tax ID numbers.
  
• Tax ID numbers are required when filing 1099s.
  
• 1099-MISCs must be issued to independent contractors that are paid $600 or more during the year for performing services for a trade or business.

If you used independent contractors to perform services for your business or trade, and you paid them $600 or more for the year, you must issue them a Form 1099-MISC to get the deduction for their labor and expenses and avoid potential penalties. (This requirement generally does not apply to payments made to a corporation. However, the corporation exception does not apply to payments made for attorney fees and for certain payments for medical or health care services.)

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Tax Pro Plus: Tax Tips - New Flexible Spending Account Limit

What does this mean for your wallet?

A flexible spending account (FSA) allows an employee to set aside a portion of their paycheck to pay for qualified medical, health and dependent expenses. Money placed into an FSA is not subject to payroll taxes, resulting in savings to the employee. The money not used in an FSA at the end of the year is lost to the employee.

A new 2013 contribution limit only allows employees to deposit a maximum of $2,500 into their account per tax year. Employer contributions to employee FSA accounts are not included in the $2,500 limit. The $2,500 limit does not apply for plan years that begin before 2013; therefore, if your company’s plan year is July–June, the $2,500 limit will not begin until July 2013.

Some plans offer a grace period that gives you extra time to claim FSA money before losing it. The grace period might give you up to two months and 15 days after the end of the plan year. Unused contributions to the FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year.